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International Transmission of Financial Crisis from the US Subprime Mortgage Market

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by

Kyle McCay

on 22 April 2010

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Transcript of International Transmission of Financial Crisis from the US Subprime Mortgage Market

The International Transmission of The Financial Crisis
From the US Subprime Mortgage Market to Germany
Through Direct and Indirect Contagion Subprime Mortgage
A loan made to high-risk borrowers
Securitization
Allowed banks to take mortgages off books
resulted in the expansion of credit in the US MBS Sold To Foreign Investors
Deutsche Bank
Evidence that clearly illustrates their exposure is limited but many articles point to their increased position in MBS of US origin prior to the financial crisis
Known counterparty to AIG CDS Indirect Contagion
Banks lose willingness to lend to each other Source: Yahoo.com Source: DB Global markets research Source: Financialstability.gov Recommendations
Increase regulation of derivatives, notably CDS and MBS
Decreased size in banks (i.e. AIG's estimated $450-$500 billion dollar exposure in the CDS market)
Increased awareness of correlations in Subprime markets Source: BBC.com
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